Financial Service Correspondent

ALTHOUGH life assurer Sage said yesterday its earnings for last year would be more than 30% higher than those of the previous year, it is still too early to declare the company's battle to restore its financial vigour a resounding success.

Sage came perilously close to collapse a year ago due to a much-maligned bid to launch a US operation, a strategy that cost it more than a billion rand.

A year ago, Sage called it quits on the US strategy and, soon afterwards, new CE Garth Griffin pledged to restore the company to its previously vaunted position amongst SA's life assurers.

The market welcomed news that Sage's earnings for 2003 would be 30% higher than for 2002 as the share price vaulted 5,5% to 190c yesterday. But the announcement tells only half the story.

Firstly, an increase in earnings should be looked at against the backdrop of a horrific 2002 when Sage made attributable losses of R248m, mainly due to the expensive US strategy.

When interviewed yesterday, Griffin conceded that an increase on that figure was "not a great standard to set".

Secondly, at last count Sage held 4,3% of Absa and the bank announced a 40% headline earnings rise for the six months to September, although this was unduly inflated by the new accounting standards for banks. Clearly, Absa will be a major contributor to Sage's earnings jump.

Griffin said restoring Sage's reputation in the mind of intermediaries and brokers had proved tough, which had manifested itself in lower sales volumes.

Total new life business dropped 24% to R329,5m, while external sales of unit trusts fell to R755m from R1,4bn before.

It may still be premature to draw conclusions about Sage's long-term prosperity based on this announcement, but there are encouraging suggestions of a recovery.

Although new individual life business dropped 25% in 2003, Sage said there was an 18% improvement during the second half of 2003. Equally, sluggish unit trust sales also rose 31% during the last six months of last year.

"It's not what we'd like it to be, of course, but the trend is in the right direction," said Griffin.

Brokers and intermediaries have proved reluctant to sell Sage products as they had before the darker days. Griffin said it had been difficult to convince them Sage had turned the corner.

"Our major challenge is in the area of the continued development of sales and re-establishing our presence in the broker market," he said.

Griffin conceded that many brokers were still not selling Sage products as they had done before the company hit it trough.

Jan 29 2004 07:42:16:000AM Rob Rose Business Day 1st Edition